As the internet emerged and became more accessible to the general public, the digital realm also became a platform for businesses to engage their target audience, generate new revenue streams, and add value to their offers. Museums, galleries, and other art institutions were no exception. What started with simple web portals evolved into unique experiences, such as virtual galleries or tours, where internet users could explore new exhibitions, play flash games, or purchase merchandise.
Today, especially after the COVID-19 pandemic, art institutions are pursuing digitalization like never before, looking for various opportunities to diversify their income and reach new audiences in untapped markets. Among these new opportunities are NFTs, which, at some point, briefly dominated the art market and haven’t left it for all these years. In this article, we will explore what NFTs are, how they’ve managed to persist in the conservative art market, and where those interested in adopting this technology should start their journey. If you are already familiar with the topic, follow this link to discover even more interesting articles about NFTs.
What are NFTs?
NFTs, or Non-Fungible Tokens, are assets that come out of the fusion between a digital file and blockchain. During the creation process, known as ‘minting’ in the industry the selected file is recorded on a blockchain, where all information about newly created assets is stored. The most popular formats for such assets is JPG and PNG, but music samples and animated pictures can also be minted.
Sold for $69 million, the NFT of Everydays: The First 5000 Days momentarily made tokens a hot topic in the art industry. Image: Beeple.
Compared to cryptocurrencies that also utilize blockchain, NFTs are not identical and cannot be exchanged for one another as you would exchange one Bitcoin for another Bitcoin or $1 for $1. It is better think of them as unique collectibles that exist solely in the digital realm and have several unique features like:
- Interoperability: Tokens aren’t bound to one marketplace or blockchain, so creating NFTs on any platform won’t limit where one can promote or sell their assets. This makes NFTs much more versatile and accessible to a broad audience.
- Scarcity: Creators or art institutions can limit the number of available NFTs. Some may mint only one or two NFTs to make the asset more exclusive, while others may create thousands, making them less rare and, consequently, more affordable.
- Trackable provenance: Tokens are secure and tamper-proof assets that can verify one’s ownership and the origin of digitized assets. Thanks to their immutable blockchain record, they are much more resistant to counterfeiting and allow users to conduct some due diligence on their own.
- Programmability: Nowadays, NFTs can be programmed to store various types of data or automatically execute deals when the contract terms integrated into the asset are met.
- Versatility: As was mentioned earlier, NFTs can represent various types of assets, including paintings, statues, photos, and music samples. However, it’s worth noting that JPG and PNG formats are the most popular and common on the market, so it may be more challenging to promote an NFT of a sample compared to a painting.
- Digital separation: Selling an NFT doesn’t mean selling the original asset. So, it’s a win-win situation for creators and art institutions who want to monetize their assets without putting physical originals on the bidding.
These characteristics are the very reasons why NFTs have gained significant attention and popularity in the art industry. Offering a new way to monetize their assets without relying solely on exhibitions, creators and art institutions have been able to expand their outreach, secure collections, and tap into new markets.
Challenges in the Digital Art Market and How NFTs Address Them
However, if the integral characteristics of NFTs had only provided limited benefits to the art community, their rapid rise would have faltered when confronted with the common challenges of the digital realm. While there were some attempts to address fraud, theft, plagiarism, and many other issues, the art community struggled to find comprehensive solutions until NFTs came to light and faced major concerns.
Copyright Issues
Easily reproduced and shared online, digitized artworks are susceptible to copyright infringement. Thanks to their integral characteristics, NFTs enable rightful owners to enforce their terms through smart contracts, while collectors can verify the authenticity of tokens through immutable records on the blockchain. As a result, the art industry gains access to a solid mechanism that protects artworks from misuse.
Fair Compensation
For a long time, there were only a few ways for creators to monetize their artworks, and for art institutions, the options were even more limited. This problem was exacerbated by market oversaturation. However, with the emergence of NFTs, the balance has shifted. NFTs enable creators and art institutions to receive a percentage from secondary sales, allowing them to benefit from their work in the long term. Thus, the art community no longer struggles to monetize their digital art effectively.
Lack of Standardization
While the digital art market lacked standardization in terms of pricing, contracts, and terms of sale, NFTs introduced a universal approach to monetizing art. Although there are still various blockchain options, the industry has already shifted toward Ethereum as the main blockchain option. Moreover, thanks to the interoperability of NFTs, need to worry about where one should mint their NFTs.
Market Oversaturation
Although in the first years, there was an influx of NFTs that even included stolen or plagiarized works, today’s market has recovered from these issues and implemented much stricter screening. There are even platforms dedicated solely to high-end art created by artists who exhibit in galleries and museums. Thus, the industry helps separate and elevate genuine creators from fake ones.
As it’s evident, with the adoption of these digital assets, conducting business online has become a significantly secure and beneficial endeavor. By applying NFTs to modern challenges, the art community, including both creators and collectors, has managed to address, if not all, at least the most complex issues that required immediate solutions. Still, one question often arises afterward: Where should we start?
Where to Begin?
There are two main routes for entering the NFT market: independently or with the help of specialized organizations. Regardless of your choice, there are three items that any organization or individual interested in minting NFTs should have:
- Crypto wallet: Similar to digital wallets like PayPal, they store your money for online purchases. However, unlike their more common counterparts, these wallets can store crypto assets such as NFTs or cryptocurrencies.
- Crypto coins: While people use dollars, euros, or other currencies for online purchases, cryptocurrency is required to create or buy NFTs.
- Assets: These can be photos, paintings, drawings, or any other item that can be digitized and primarily saved in formats like JPG or PNG.
On the market, there is a wide variety of crypto wallets. For example, Coinbase is one of the options preferred by beginners. Source: Screenshot of the Coinbase website.
After obtaining all three items, one is ready to mint their NFTs in one way or another. If an issuer chooses an independent approach, they will need to select one of many NFT marketplaces, create an account with their crypto wallet, and proceed with the minting process. This process may vary slightly depending on the platform but typically involves filling out the NFT description, setting the terms of the deal, and determining the rarity and price of their offering. Afterward, they will need to pay fees for minting the NFT and publish it on the public marketplace.
However, for a representative of an art institution, we recommend considering specialized organizations like Digital Basel. They offer all-around assistance, guiding your organization through tokenization, promotion, and negotiations with collectors. Consequently, the first experience in minting and selling NFTs will be much more favorable than attempting to navigate these steps alone.
Ultimately, regardless of how one adopts it, one will be able to witness the benefits of this cutting-edge technology firsthand and verify how advantageous NFTs are to art institutions, creators, and collectors.
